Compute Engine option is disabled in VS 2017

I was trying to create a simple .NET Core 2 Web API using "ASP.NET on Google Cloud Platform" template in Visual Studio 2017 on Windows 7 x64. I am following this Quickstart guide - https://cloud.google.com/tools/visual-studio/docs/quickstart

On step 12 when I was trying to Publish using "Publish to Google Cloud..." the option "Compute Engine" was disabled.

I can see the VM listed in "Google Cloud Explorer" window under "Google Compute Engine".

Also in appsettings.json I can see the Google.ProjectId correctly set to Project name. I have already deleted and recreated the VM once to no avail.

How do I get "Compute Engine" option enabled?

As @jonskeet said, you probably can't deploy your project to Compute Engine because the project you are trying to deploy is targeting .Net Core. I realize that the steps you were following are telling you to create a .Net Core project and then deploy it to the VM, that's not right, and we'll change it.

Create a new project selecting .Net Framework instead of .Net Core and you should be able to deploy it to the VM.

The following image would be the right one to follow on Step 7 of Create an Asp.Net project

UPDATE:

As of March 2018 not being able to publish .NET Core applications in Compute Engine through Google Cloud Visual Studio Extension is not a bug, it is working as intended. Using the extension, you can publish .NET Framework applications to Compute Engine and .NET Core applications to App Engine Flex and to Container Engine. You can see here.

What is a bug is the image used on Step 7 of Create an Asp.Net project on the Quickstart you were following, since it is showing the creation of a .NET Core targetting application for publication in GCE. That is already being fixed.

If you want to deploy a .NET Core application to App Engine using the Google Cloud Visual Studio Extension you can follow this other Quickstart.